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Germany's Renewable Energy Strategy Could Send a Lucrative Tailwind to These Power Giants

Germany has shifted quickly toward renewable power, particularly solar, but Merkel seems to be pushing a new tact: offshore wind.

In the early days of June last year, Germany generated half of its electricity from solar. A massive (for Germany) 23.1 gigawatt hours was produced by solar arrays at lunchtime on June 9th. And this is exactly why German Chancellor Angela Merkel is looking to shift toward other renewable power sources, something that should boost business at industrial giants like Siemens AG(NASDAQOTH:SIEGY)and General Electric Company(NYSE:GE).

Lumpy, lumpyGermany satisfying half of its electric needs with solar is a great headline, but it's actually a statement to the risks inherent to solar power. Note that the power generated was at around noon on a summer day. That's peak generation time... how much did solar produce 12 hours later? My guess, since it was midnight, is none. So solar, while great for the planet and all, is intermittent.

Source: SayCheeeeeese, via Wikimedia Commons.

There's power when the sun shines, but none when it doesn't. And the amount of power generated will fluctuate based on how sunny it is when the sun is shining. Other options are needed to balance things out. Which is Merkel recently told the German Renewable Energy Federation: "It is right that we now need a respite from photovoltaics." Her suggestion was a switch to offshore wind, "I think we will now have a lot to learn from offshore wind. Everyone should get their chance."

Offshore wind, which produces power more smoothly than solar, seems to have just gotten a big boost. And that's music to the ears of a company like Siemens -- an industrial giant that is a leading player in offshore wind in Europe.

Will the big get bigger?For example, in 2013, this German company provided 60% of the offshore wind turbines installed in the old world. And last year, that figure grew to an even more impressive 86%! Germany, meanwhile, installed five wind farms in 2014 with a total of 142 turbines capable of generating roughly 500 megawatts of power -- second to the United Kingdom, which installed around 800 megawatts worth of turbines. It's worth noting that the United Kingdom has four times as much offshore wind installed on a cumulative basis as Germany, and the Brits aren't done building yet. If the U.K. can install that much offshore wind, it's reasonable to think Germany can install a lot more than it has so far.

Source: Ashley Dace, via Wikimedia Commons.

So, Siemens, being both a German company and the market leader in Europe, should be in the pole position to benefit from a German push toward offshore wind. But it's not the only company that might want in. For example, U.S. industrial giant General Electric Company is in the process of buying the energy business of Alstom. Although it's a complicated deal that will leave GE partnered with France on key assets, one of the things GE is getting is Alstom's Haliade 150-6MW offshore wind turbine, one of the largest turbines on the market.

According to Alstom, because of the turbine's larger blades, it produces 15% more power than competing products. While there's more involved in the GE/Alstom tie-up, this cutting-edge offshore wind tech will help get GE back into a market that it's tried, and failed, to break into in the past. Being a U.S. company aside, offering up an industry-leading turbine could help GE get some deals as Germany's leaders push to diversify their power-generating assets.

Offshore grows upOffshore wind is relatively expensive compared to other renewable options, most notably onshore wind. However, the U.K. and now Germany both appear to be embracing it as an important power option. Even the United States, which has no offshore wind right now, looks increasingly close to getting on board with offshore wind. That could help shift the overall industry into a higher gear and reduce costs, with giant industrial players like Siemens and General Electric getting themselves ready to go along for the ride. Investors looking to fill their sails with offshore wind should keep a keen eye on these two companies.